The Australian co-operative sector is suffering from a ‘crisis of confidence’ which is undermining its continued development in Australia, according to the UK’s leading co-operative educator, Mervyn Wilson.
Mr Wilson is the chief executive officer and principal of the Co-operative College. He was brought to Melbourne by the Victorian Co-operative Federation for talks on co-operative development with Murray Goulburn Co-operative (MG), Monash University and State Government officials.
According to Mr Wilson the real problem which underpins this crisis of confidence in Australian co-operatives is their invisibility and the knock-on effect this invisibility has to potential and existing members.
“Co-operatives in Australia seem to be invisible to policy makers, statutory advisory services and across the education system. Individuals don’t know of the co-operative model because they have generally never been exposed to it during their education. As a consequence, existing members fail to fully appreciate the benefits they receive and potential members never get ‘switched on’ to these benefits,” he said.
Getting the message out
Mr Wilson said co-operatives and their supporters needed to get the message out that co-operatives are highly successful businesses.
“Australian co-operatives and their members need to look at the success of the co-operative sector on a global scale. For example, in the USA alone, 36 million people receive their electricity through a co-op. More that 150 million people use credit co-ops and co-operatives support a vast array of businesses worth billions of dollar in the rural sector,” he said.
He advised the Australian co-operative sector to reassert its confidence.
“Co-operatives and the co-operative sectors in general have to be prepared to be much more aggressive in terms of advocating the benefits of co-operation,” he said.
Research in Nth America shows that people trust co-operatives much more than many other organisations.
The fact that they are not seen as purely profit driven and are devoted to meeting members needs rather than those of external stock holders gives them extra credibility.
“Co-operatives need to gain leverage from this, maximise their strengths and get the co-operative model back into the public policy debate,” Mr Wilson said.
“We should recognise that we live in a modern mixed 21st century economy which has sufficient room in it for a variety of business forms.
“Essentially it is about challenging the ‘dogma’ of the supremacy of the investor owned model of enterprise, which at the same time seeks to marginalise co-operatives.”
“We need be constantly stating in deed and action that we are 21st century businesses and more than capable of holding our own in a modern economy,” Mr Wilson said.
Benefits of co-operation
One of the big roles of co-operatives is that they raise the benchmark and standards within the industries they operate. For example in the agricultural sector they are often credited with setting the benchmark price to farmers for their raw product supply.
The Rochdale pioneers in the North of England - credited with founding the modern co-operative sector - grew on the back of a raft of unscrupulous trading activities which saw chalk added to flour, watered down milk and weights and measures altered.
“The co-operative offered a trusted middle man role ensuring that its consumer members did not get ripped off in their day to day purchases and that its supplier members got a fair price for their produce, Mr Wilson said.
These days we have food standards and various regulations which take care of these consumer issues - so does that spell the end of the usefulness of co-operatives?
“Not at all,” Mr Wilson said emphatically. “What it does highlight is that just as with any other business, in order to survive you need to adjust to the changes taking place in society and to the needs of a new generation of members.
“What co-operatives have to continually do is identify these emerging market opportunities and how these affect the needs of their members,” he said.
As an example, Mr Wilson highlighted the way consumer co-operatives in the UK had embraced the trend towards healthy eating and explored ways to improve the consumer’s ability to select the types of foods that are good for them.
“UK co-operatives have led the way in the disclosure of fat content and sugar content on the product packaging. Running a campaign built around what they called the ‘lie on the label’ and challenging what they claimed were ‘the unsavoury tactics of multiples and big food processors’, consumer co-operatives have carved out a profitable market,” Mr Wilson said.
The fair and ethical trade movement
Mr Wilson said UK consumer co-operatives had also been at the forefront of bringing the concept of fair and ethically traded products into mainstream consumer awareness.
They have been very active in ensuring goods are actually fairly traded with producers, particularly in the developing world, by developing sound sourcing polices through the supply chain.
“We live in an age of highly complex supply chains. Many of the big brands produce absolutely nothing, but have contracts with a whole range of suppliers. Under this system how can you be confident that the shirt you are wearing has been produced without child labour or other unsavoury work practices?” Mr Wilson asks.
Co-operatives have been at the forefront of this issue, by developing auditing and tracking systems throughout the supply chain to ensure ethical production systems are maintained.
It is a concept that has gained currency in the UK due to the practical benefits it has produced.
Mr Wilson highlighted the case of the Kuapa Kokoo Co-operative in Ghana which on the strength of the fair trade premium it receives on its coffee production has so far built nine new schools in the region.
These sort of success stories lodge in the concisousness of many consumers and translate to increased sales.
“In the UK, all consumer co-ops’ ‘own label’ brand coffee and chocolate is sourced from fair trade producers. A move which has led to impressive growth. When the change was made from standard commercial sourcing to fair trade sources, coffee sales grew by more than 70%,” Mr Wilson said.
As a result there is an increasing range of fair trade product on offer and mainstream supermarket chains have been keen to follow suit.
The Tesco chain of supermarkets, UK’s biggest retailer now has a strategic objective of replacing ‘The Co-op’ – a leading consumer co-op in Britain - as the number one supplier of fair trade products.
Mr Wilson said while this represented a significant threat to the co-operative’s business, it was a ringing endorsement of the ability of co-operatives to spot market place trends and capture the benefits of them.
On Demutualisation
Demutualisation has been global trend and in Mr Wilson’s view it has been driven by a perverse logic which dictates that assets built up over many generations of co-operative suppliers can be suddenly crystalised in the hands of the current members.
“This sort of logic to me is an absolute obscenity,” he said.
But once this logic has been accepted by the board and management, then tremendous financial leverage is created which drives the notion of demutualization right down to its grass roots members.
As the saying goes in agricultural co-operative circles – don’t get in the way of a farmer and a pot of money.
“The period when co-operative assets are being rapidly built, most frequently occurs in the first 50 years of co-operative operation. What happens with demutualisation absolutely defies the capitalist theory of risk and reward. The current generation of members who are being rewarded take no risk. The risk was taken by the pioneers because they believed in the model,” he said.
Mr Wilson maintains there are two main factors contributing to the decision to demutualise.
The first is long standing neglect of members by board and management.
“The co-operative only communicates with members once a year and even then only to tell them about the re-election of people they had never heard of in the first place,” Mr Wilson said.
“Given this reality, when members are offered money for something they never really knew they owned in the first place, it is not surprising they happily sell their share,” he said.
Based on experience in the UK, Mr Wilson said the second factor was that successful demutualisations where most often led ‘internally’ by management and boards - who were also likely to be the prime beneficiaries of the changes they were proposing.
“Massive campaigns for demutulisation by third parties from outside the organisation have very little history of success against a resolute board,” Mr Wilson said.
He believed this only emphasised the importance of the board setting the co-operative culture of the organisation and ensuring all executives and employees went through an induction course to reinforce their understanding of the ‘co-operative difference’.
